Plaid expands income verification suite, adding more automation and anti-fraud

an article written by Rohan Sriram, product manager at Plaid

Digitization has changed people’s relationship with their finances. In fact, over 9 in 10 Americans today are using some type of digital financial application to manage their money. On top of that, according to the Federal Reserve, one in five Americans today do not own a credit card. As such, determining one’s creditworthiness is becoming more complex. With money moving faster than ever, lenders need real-time data for more precise decisioning and tools to manage rising fraud while lowering cost. That’s why Plaid is excited to share how we’re improving Plaid Income to help you boost automation while curbing fraud risk. 

Smarter decisions with real-time income information 

One of the advantages of supplementing traditional credit reports with cash flow data from the source is the ability for consumers to share their financial data in real time during decisioning. In a recent survey by Plaid, 83% of traditional lenders were very open to using cash flow data, like bank account balance and transaction history, to modernize loan offerings. That’s why Plaid enables lenders to verify borrower income in three ways: through a bank connection, a payroll connection, or by simply uploading a pay stub or bank statement. 

That’s not all. We’ve recently made a number of improvements to the product to give you access to the most accurate and up-to-date income information.

Bank Income:

Improved categorization: We’ve refined our machine learning model to more accurately identify and categorize income streams, including things like detecting pay frequency, pay categories, and more so that you can better understand customer financials.

Real-time income changes: Whether your customer is engaged in salaried, gig, or freelance work, this new feature allows you to receive instant notifications of income changes so you can improve your decisioning models.

Payroll Income:

More robust payroll data: We’ve recently added new partnerships to enhance our payroll data coverage. Across our entire income verification suite, we now have almost 100% coverage of the US workforce.

Fraud detection is built in every step of the way

Income documents continue to be an important fallback in most lenders’ underwriting stack. We have expanded the documents we support by adding bank statements in addition to paystubs and certain tax documents.

Getting structured data from uploaded documents is only one part of the equation. Increasingly, instances of doctored W2s, pay stubs, and bank statements are becoming more prevalent. We’ve added out-of-the-box measures to detect document tampering during the income document verification process so that you can verify documents while we run fraud checks in the background. Using machine learning technology, Income can identify over 30 fraud signals like whether an original paystub was photoshopped or changed to another name. A fraud risk score is provided to the lender for every document assessed as part of the verification process so that the lender can then determine the right course of action.

While fraudulent documents can be one small piece of the puzzle, they can have a large financial impact on lenders. Our goal is to make your verification process as efficient as possible by providing detailed information to help you make informed decisions and save money.

Streamline your loan lifecycle with Plaid

We know that your loan lifecycle doesn’t just start and end with income verification; cash flow underwriting, identity verification, and loan disbursements and repayments are also key components of that process. Now, you can manage all the critical pieces of a loan lifecycle with Plaid.

Real-time cash flow data: In addition to credit reports you may be separately obtaining, cash flow data can help you better understand your borrower. Through Plaid’s Assets API, you can now access transaction history for up to two years, lender-specific transaction categorization, account balances, and account identity information. 

Identity verification: Know Your Customer (KYC) compliance is a necessary step for anyone who’s using any form of financial services. With Plaid Identity Verification (IDV), you can now run verifications as part of your onboarding flow alongside account linking and income checks. IDV is also seamlessly integrated across Plaid’s stack so we can now match the user’s identity from the verification step with the account information we have on file, adding an extra layer of security and fraud prevention. 

Payments: Once a loan application has been completed, and borrowers are approved, they traditionally need to wait 3-5 days until those funds are released. But now, when paired with Plaid Transfer, lenders can offer near-instant disbursements via ACH or Real-Time Payment rails, giving eligible customers the option of getting paid faster.